What Xiaomi needs to succeed in the global mobile market

Xiaomi Technology, China’s biggest smartphone maker, plans to enter the US market later this year by offering accessories such as earphones to test market response.

Such a move could be part of a pre-marketing campaign for a multibillion-dollar initial public offering on the US bourse.

It’s a given that Xiaomi and its founder Lei Jun have a long way to go in winning the trust of US investors and consumers. The company has to deliver in terms of innovative technology based on its own research capability. Otherwise, the US market may have no room for the ambitious startup.

Hugo Barra, a senior executive at Xiaomi, announced last week in San Francisco that the company will open an online store selling earphones, battery packs and other accessories.

Why is Xiaomi not bringing its best-selling smartphone products to the US market?

Barra said this is mainly due to the regulatory issues. “The effort required to bring those products to the market is an incredible amount of work,” he said.

So instead, the company is dipping its toe into the water with simpler products.

Xiaomi ranked fifth among the world’s biggest smartphone makers in the fourth quarter with a global market share of 4.4 percent, according to IDC.

But despite its remarkable charge into the global arena, it is often seen as a producer of cheap, albeit fashionable, handsets whose design and technology are copied from foreign models.

The general view is that it remains a Lilliputian in the innovation department.

Its entry into the US market will be led by products that don’t involve innovative technology and design. It’s a timid attack for such an aggressive company which made its debut only in 2010.

In fact, the US campaign may only put the company under closer scrutiny in the area of intellectual property rights amid allegations that the technology and design of its products have been copied from others.

At a recent event, Apple’s executive vice president and top designer Jony Ive, when asked for his comments about Xiaomi, “the Apple of China”, failed to hide his disgust and said some phone makers were simply copying what the US company had worked on for seven to eight years.

“It is theft and it is lazy. I don’t think it is OK at all,” Forbes quoted Ive as saying.

Mobile technology firm Ericsson has sued Xiaomi for infringing its patents on smartphone products, and as a result of the lawsuit, a New Delhi court ordered the suspension of the importation and sale of Xiaomi handsets in India.

Industry experts note that not only do Xiaomi’s handsets look like Apple’s iPhone, its operating system MIUI, which is based on Google’s Android, also includes content that appears to have been copied from Apple’s iOS user interface, with similar font size, clock display, app ranking and unlocking system.

Amid such accusations, it will be difficult for Xiaomi to earn respect of its global peers. It has to settle all the patent issues over its products and work hard to establish a unique product design.

According to China’s State Intellectual Property Office, the number of Xiaomi patents recorded in SIPO’s data base is 1,904 units, compared with Apple’s 3,052. In terms of exterior design, Xiaomi has 97 patents while Apple holds 672 units.

Xiaomi isn’t exactly “lazy” in this department. It may be that it’s trying its best.

For example, the company has filed a patent application for the slim design of the back camera on its Mi Note model.

However, Xiaomi does not have any intellectual property rights in upstream mobile communication technology.

That could be a major handicap for Xiaomi as it takes on competitors with their own semiconductor research capabilities like Apple, Samsung Electronics, Huawei Technologies and ZTE.

Xiaomi is now considered the world’s most valuable startup with its latest valuation placed at US$45billion.

But for Xiaomi’s sustainable growth, Lei should focus more on intellectual property rights rather than brand building.

This can be achieved by acquiring chip developers, just like what Lenovo did last year in buying Motorola Mobility from Google.

Xiaomi can also partner with local peers to acquire the licenses of certain key patents on mobile communications.

And before that, the company needs to forge deals with license holders from Ericsson to Nokia and Apple for the use of their intellectual property rights.

Lei said Xiaomi is working to expand its portfolio globally after filing 600 patent applications last year. It plans 1,000 applications this year, and double that number in each of the next two years.

That may not be enough if the company wants to be on top of the heap. Xiaomi will need a very deep pocket to acquire all these assets and succeed in the highly competitive global mobile phone market.

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